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This week saw the publication of the Final Report of the 2020 Tax Commission, issued by the pressure group the TaxPayers’ Alliance and the Institute of Directors, calling for tax reform to make taxes “lower, simpler and more transparent”. The most eye-catching proposals were a flat income tax rate of 30% and the reduction of government spending to pre-world war II levels. But one of the recommendations which received less attention was the call to abolish all wealth taxes: capital gains, stamp duty, inheritance tax – you name it.

So why do we need wealth taxes? For a start, they raise around £15 billion a year, equivalent to a quarter of the education budget. Giving this up would mean raising taxes elsewhere or cutting spending. While the Commission certainly advocates further spending cuts, it provides no explanation of where they will fall or who in society will lose out.

But beyond raising revenue, wealth taxes play an important role in the UK tax system. They help to reduce tax avoidance, widen the tax base, reduce the burden on earned income and could have a role in reducing the volatility of the housing market.

However, the Commission is right to argue that existing wealth taxes in the UK are badly designed. But the response should be to reform rather to remove.

Inheritance has the strongest grounds for being taxed. Stark differences in wealth, combined with low inheritance tax, exacerbate inequality. Those at the top are more likely to have something to leave than those at the bottom. The Commission argues that inheritance tax discourages savings, but the expectation of receiving inheritance is likely to have the same effect. The current inheritance tax system is flawed because it is open to avoidance by those with enough disposable income and understanding of the tax system to give away their assets in advance, making it deeply unpopular with the middle classes

Rather than scrapping inheritance tax, a fairer option would be a tax on lifetime gifts. The more an individual receives, the more tax they would pay, and even levying a tax only on gifts worth more than £150,000 could generate £1 billion more in revenue than inheritance tax currently.

Similarly, the Stamp Duty Land Tax is in serious need of reform. The current bands do not work. A £1 rise in house price from £500,000 to £500,001 lifts the stamp duty by £5,000.

Reforming stamp duty would see it become a marginal tax which applies gradually as property values rise.

In the longer term, more radical reforms would look to raise extra revenues from property and land taxes, for example through a land value tax on undeveloped land. There is broad agreement from economists and commentators across the political spectrum that land is a good basis for tax but the practicalities and politics are difficult. Additional revenues raised from property and land taxes could be used to reduce the burden on earned income or to ensure that tax rises make a greater contribution to deficit reduction than under current plans.

No one likes paying tax. But in developing Labour’s next manifesto, newly appointed Jon Cruddas should confront the issue of wealth taxation as part of efforts to secure the public finances and achieve greater social justice. Tax is always going to be taxing but it could be fairer.

Thoughtful argument. thanks. I do not agree with scrapping inheritance tax, but think very carefully before increasing it. It is, essentially, a death tax, and increases to it I think wouldn’t reflect human nature. Through my life I pay taxes (40% on income, 20% sales tax and countless others), so I’ve always paid my way in society and probably am at a point where I’ve paid in more than I’ve taken out. Human nature says that parents will want to leave the leftovers of their life’s work to their children, to ensure they have a stable and good quality of life. That is one of the main drivers of aspiration – giving your kids more than what you had. I’d be very wary of the state taking that away from people – I suspect there would be a lot of anger, people are fundamentally free not owned by the state, both in life and in death.

By the way, the top 10% already pay 60% of all income taxes, and this should be born in mind when talking about further taxes.

The truth is you can’t tax your way into prosperity, you have to grow the economy – and higher taxes are more likely to harm GDP rather than help it.

http://twitter.com/robertsjonathan Jonathan Roberts

Thoughtful argument. thanks. I do not agree with scrapping inheritance tax, but think very carefully before increasing it. It is, essentially, a death tax, and increases to it I think wouldn’t reflect human nature. Through my life I pay taxes (40% on income, 20% sales tax and countless others), so I’ve always paid my way in society and probably am at a point where I’ve paid in more than I’ve taken out. Human nature says that parents will want to leave the leftovers of their life’s work to their children, to ensure they have a stable and good quality of life. That is one of the main drivers of aspiration – giving your kids more than what you had. I’d be very wary of the state taking that away from people – I suspect there would be a lot of anger, people are fundamentally free not owned by the state, both in life and in death.

By the way, the top 10% already pay 60% of all income taxes, and this should be born in mind when talking about further taxes.

The truth is you can’t tax your way into prosperity, you have to grow the economy – and higher taxes are more likely to harm GDP rather than help it.

Brumanuensis

Considering that only around 6% of the population will have to pay IHT, I don’t think there’s any serious risk that peole will be put off ‘aspiration’. It’s a bit of a non-issue and to be honest, I don’t see what’s virtuous about parents dumping loads of money on their children after death. It entrenches pre-existing advantages accrued to particular groups and it seems a strange form of ‘aspiration’ to give your children a leg-up through giving them money, rather than their own efforts (if we take a meritocratic view).

It’s also important not to quote tax figures in isolation. Income tax receipts are only part of a persons wealth and if we include NICs – which tend to be less progressive – then the tax system becomes more regressive in nature. It’s also worth considering what you’re taxing before coming up with blanket statements about ‘higher taxes are more likely to harm GDP rather than help it’. There is evidence after all, that optimal income tax-rates in the US are nearer to 70% than 40% (where they are now).

http://twitter.com/robertsjonathan Jonathan Roberts

High inheritance tax is abhorrent and immoral in my book. It takes a phenomenal level of arrogance for people to demand a large cut of a dead man’s life savings, when they never knew him.

You’re right that it’s a non issue though – high IHT is a fantasy of the socialist minority who think a ‘fair’ society means they should have accesss money that they themselves haven’t earned.

I think the left will always struggle to be economically respected so long as all it cares about is taxing the hell out of people, and it really needs to get over its arrogance in believing they have a right to put the fruits of another man’s labour into their own pocket.

Oh and this video is based on real data – http://www.youtube.com/watch?v=-zP2M9_KzwQ&feature=player_embedded&noredirect=1 and shows high tax and high spending countries produce lower growth and a range of genuinely important social problems like higher infant mortality and poorer school performance. If Labour wants growth and to improve standard of living, it should not assume high taxes is the way to do it.

Peter Barnard

Jonathan R,

We have always had some kind of “legacy tax” in this country, well, for the last few hundred years or so. The original “legacy tax” became estate duties, and now we have inheritance tax.

As someone on “the left,” I actually don’t want to tax the hell out of people, but as long as we have the current grossly inequitable distribution of income, where wages for working people have to be topped up by tax credits, housing benefits and so on, so that people can actually afford one of the the most basic needs – a roof over the family’s head – then the grabbers at the top will have to put up with “inequitable” levels of personal taxation, and fair game they are.

Perhaps – a “fair day’s wage for a fair day’s work?”

Especially so in property, where publicly-provided infrastructure (CrossRail, Jubilee Line, a link to the motorway system) can enhance property prices, then indeed, some pay-back is due.

Regarding the “fruits of labour,” it’s a shame that Adam Smith isn’t around so that you could have a natter with him : “It is but equity, besides, that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged.”

Our economy has become a lot more diverse since 1776, but the principle holds.

http://twitter.com/robertsjonathan Jonathan Roberts

Hi Peter, as I say, I am not arguing for abolishing IHT, I’m simply expressing contempt for the view amongst some that it should be higher. I’ve had conversations with people on here before who have said everything belonging to a deceased person should be handed over to the state immediately, and that leaving something for your children is immoral. I find it terrifying.

I would say ‘payback’ doesn’t come into it. People pay their taxes, and if the way Government spends it benefits them in some way they should not be punished for it.

I’d also say that the ‘grabbers’ at the top actually work very hard (not just now, but they worked hard at school, later education, often start towards the bottom and work their way up) and that disrespect for those who succeed is not condusive to an aspirational society.

Peter Barnard

The “benefit” is intended to be in the utility that is provided, JR (usually economically-advantageous improvements in distribution and the movement of people, affecting everyone).

The £50,000 + improvement in the price of property is a private benefit that is disproportionate to the taxes paid (and funding the utility), by the particular property owners, eg a “windfall” has resulted.

http://twitter.com/robertsjonathan Jonathan Roberts

So if Government action resulted in your house price falling, would you expect Government to offer compensation? i.e if fewer police officers resulted in higher crime, or a school started performing more poorly, or the failing economy meant the town centre fell into disrepair, should Government compensate that homeowner?

Surely it has to work both ways?

Peter Barnard

I think the law does indeed provide for compensation due to a government action provoking a fall in the value of a house.

http://twitter.com/robertsjonathan Jonathan Roberts

Can you find me that in statute? I’d be interested to see the detail. If it is available beyond in extraordinary circumstances the Government would be sued millions of times. Only then would it be a like-for-like comparison with penalising people for having a house increase in price.

By the way, we already have wealth taxes via capital gains for selling a house at a profit above £11k.

Peter Barnard

It was an “I think”, JR, based on a vague memory recollection. Maybe I was wrong.

But well done in the deft way that you turned the argument around. I should not have fallen for it.

However, my point still stands – if someone benefits disproportionately from public infrastructure investment, ie £50,000 + on their house, then they cannot be said to have “earned” the windfall through their own effort – more a case of luck and chance of being in the right place in the right time.

Capital gains tax on houses? Not on the primary home – perhaps on second homes, but not on main residences, and that applies to the vast majority of dwellings.

Peter Barnard

JR : Land Compensation Act 1973.

In the Act, the compensation is payable because of a “deterioration of amenity,” which will inevitably be manifested by a fall in the value of the property

http://twitter.com/mistyblulabour dave stone

“put the fruits of another man’s labour into their own pocket.”

Isn’t this what employers do? Why should employers have more rights than a democratically elected government?

http://twitter.com/robertsjonathan Jonathan Roberts

No. An employer creates a job, offers it to the public at a rate competitive in the market place (based on the skill-level and experience necessary to do the job competently). The successful candidate agrees the rate at which they are paid and then begins the job, or turns it down if necessary. It is a private contract between two parties entered into freely.

High inheritance tax has nothing to do with freedom, and everything to do with authoritarianism. People are not slaves of the state, they are free people. If you are forced to hand over to the state you life’s earnings upon death, your life has been one of slavery. And that is abhorrent.

http://twitter.com/mistyblulabour dave stone

Or, to put it another way (and I write as an ex-employer): John makes a shed from materials costing £50, I pay him £50 for making it. I sell the shed for £200. Subtract overheads (-£50) and I’m left with £50 to do with as I please.

The £50 surplus = the fruits of another man’s labour in my own pocket.

http://twitter.com/robertsjonathan Jonathan Roberts

No Dave, because you as an employer also laboured to start, build and run the company that employed John – which carried additional risk and burden. The reward for your own core labour plus the additional responsibilities and risks of running your own business is that you get a higher cut of the profits from that shed.

If there was no additional financial reward for the inherent risk of setting up your own business, then it is likely you would not have started your shed building business to begin with, and therefore both you and John would currently be unemployed.

Brumanuensis

That’s true, but it does rather confirm Dave’s point. The profit may be useful, but it is still the fruit’s of another man’s labour.

http://twitter.com/robertsjonathan Jonathan Roberts

No, my original point on ‘fruits of labour’ was linked to the point ‘ It takes a phenomenal level of arrogance for people to demand a large
cut of a dead man’s life savings, when they never knew him.’

The fence builder has a personal and professional relationship with ‘John’ that is agreed upon through private contract. My argument is against the state taking possession of belongings by force through impositions of higher tax burdens

http://twitter.com/mistyblulabour dave stone

No mate. I factored my own costs into the overheads (an accountant will give you a formula for this). And remember, I’m a high-roller – there are 100 Johns beavering away to the benefit of my pocket.

Winston_from_the_Ministry

How would John have faired without the purposefully designed hammer, the shed design, the cut timber, the processes which created all of these things he had no hand in.

All fruits of other men’s labour. And none of them will see a sniff of the profit.

If anything, John does rather well. Much better than he could have done on his own.

Brumanuensis

No-one hands over their ‘life’s earnings’ to the state on death, nor would they even if IHT were expanded. The current rate is 40% on amounts over £325,000 and the law is riddled with loop-holes. So describing high IHT as ‘slavery’ is ridiculous hyperbole.

1 Timothy 6:7

Brumanuensis

I find it strange you are denouncing the Inland Revenue, yet what right have children who inherit wealth ‘to put the fruits of another man’s labour into their own pocket’. It isn’t theirs after all. They’ve done nothing to earn it. They just had it handed down to them. I fail to see why this is somehow sancrosanct.

If you are an employee, to have ‘earned’ something, your efforts must have made a tangible contribution to the firm’s profitability. If you’re a good employee, they probably have. However, how do we measure this? In a large enough company, the contribution of any single employee is likely to become indeterminable. So the company aggregates, trading off a variety of factors – prevailing wages, average productivity, profitability, etc. – and comes out with a sum that reflects a presumed ‘fair’ trade-off for the employee’s labour. The employee may benefit from a collective bargaining arrangement that improves this at a later date. He might be happy with the arrangement. One thing that can’t be said though, is that he has ‘earned’ this amount, because it almost certainly does not correspond with his exact contribution to the profit of the firm.

Consider the John Lewis Partnership’s annual bonus. The bonus is calculated as a share of the profit, assigned as a fixed uniform percentage of everyone’s salary. So the aggregate contribution of all employees accrues as an equal individual reward to each individual employee. I happen to think this is a good arrangement, but it does open up some obvious free-rider problems. Some employees will be ‘better’ than others and yet all receive the same percentage – assuming the Partnership is profitable. Of course, you could argue that this creates a productivity incentive – which I’m sure it does – but if you strip this out, the anomaly remains.

Why do I mention this? Because it illustrates how hard it is to align a person’s income with what they actually ‘should’ earn and this ought to make us wary of assuming that a person’s income is ‘theirs’ and therefore sancrosanct. In reality, a person’s income is determined by a vast array of factors, a great many of which are beyond their control. So their ownership claim to ‘their’ money is quite weak.

This is before we take ‘luck’ into account. If someone is naturally talented, have they ‘earned’ their good fortune? And if someone is in a role that attracts greater social acclaim – e.g. a footballer – why is it ‘fair’ for them to earn more than a cleaner or a teacher? This is not as simple as you are making out.

Peter Barnard

Indeed, Brumanuensis.

Professor John Kay wrote an excellent piece on this last year : “Why the rioters should be reading Rousseau.”

If you have the time, Google John Kay Rousseau.

http://twitter.com/robertsjonathan Jonathan Roberts

‘They’ve done nothing to earn it.’

That’s irrelevant. The point is that it is a dying man/woman’s right to decide where the money goes upon their death. It is his choice. If he chooses to give it to his children, that is his right. It is none of my business nor is it any of yours to decide what happens to it.

Brumanuensis

I’m sorry, it has everything to do with it.

The dying man is not being ‘taxed’ remember. The tax is being levied on the wealth he has transferred to his children. So it’s not his wealth, it’s their wealth – the dead being incapable of holding assets. This means their personal circumstances come into play when determining taxation.

The dying person’s right to transfer money is preserved; it’s just subject to taxation. But really, speaking of the dead as having ‘rights’ is not persuasive. In libel cases, for instance, there is no offence in this country of ‘defaming the dead’. The legal standing of the dead is very limited and their moral standing even less so. The bequests of a dead person may be facilitated by a will, but this does not prevent them subject to modification after death. In my will, for instance, I leave money to my neices and nephews, but subject to duties and taxes. I don’t resent this, because I recognise I have no absolute right to anything after I’ve died.

Peter Barnard

Not only do you have no “absolute right,” but your need is even less …

jaime taurosangastre candelas

Peter,

you raise a point that there is a counter-point to, that of human nature.

I pay my taxes (all of them, without evasion or avoidance), fairly and squarely, and I understand and support your arguments on things like the cost of infrastructure. That is very fair, and I see daily the benefits I get. But there is a point of principle – you pay your fair share during life, but anything left over is not for the government to take when there is a living and breathing relative who is a better inheritor. If the government want more money from me, it should have the cojones to ask me for it to my face, not take it when I am dead. I will listen to their demand, and either agree or disagree with my vote.

Peter Barnard

That’s not quite correct, Jaime (“gov’t should have the testacles to ask me for it to my face”).

As I remark, legacy taxes have been with us for a few hundred years now in one name or another and everyone is aware of them. Some, I might add, are more aware than others of the loopholes … and no government has repealed or abolished legacy taxes in the last few hundred years, either.

Adam Smith basically approved of legacy taxes, especially after “the birds had left the nest,” and were capable of making their own way in life. If the birds hadn’t left the nest, he could see that a legacy tax should be mitigated.

For most people in this green and pleasant land of ours, when they shuffle off this mortal coil (most of) their wealth is in their dwelling.

One of the contributors to rising house prices is our planning laws ; these laws inhibit the supply of land for residential development, and hence provide upward pressure on land prices.

The inhibition effect of these laws only benefits property owners ; they do not benefit people living in “social housing.” So, given that property owners (and their offspring) benefit by enacted legislation, then as far as I am concerned there is some quid pro quo due.

You may recall that I am a dwelling owner. I am also quite happy to provide some quid pro quo.

jaime taurosangastre candelas

Peter,

ah but you and I are probably not playing off the same base set of assumptions. I certainly acknowledge your point that these taxes are commonplace, for hundreds of years, and indeed that some well known philosophers / economists may have heralded them. That does not mean to say I agree.

On the planning laws, a technical point. Your argument only has validity for properties with “developable” (if there is such a word) land next to them. I would suggest, looking at only my own little town, that for 95% plus of properties this is not the case.

Peter Barnard

Jaime,

All privately-owned properties benefit from the state-sanctioned inhibition on land for residential property development.

The price of land inexorably rises, and dwelling-owners benefit to an extent that exceeds what they paid in the first place.

jaime taurosangastre candelas

Peter, see top of thread. box too small.

Brumanuensis

At present, you’re sailing dangerously close to a ‘taxation is theft’ argument, which would be naive and counter-productive.

Peter Barnard

It may not be any of “our business,” JR, but it is the business of sovereign parliament and “we the people” either like what the party in government does, or we don’t – in which case we vote them out.

And, as I have pointed out already, a legacy tax in one form or another has been around for a few hundred years now.

What I don’t like about any of this is that for the last thirty years, and more, the right have had everything just about their own way on taxation, employment laws (the trade unions have been castrated, almost), monstrous earnings for the so-called “wealth creators” and they still want more, using the totally discredited “trickle down” theory.

Loxxie

This is silly.

There is no universal right that the dying can leave money or property or other assets to their chosen heirs; all rights in a civil secular society arise by statute.

The point is that citizens of a country HAVE to obey the laws of the land that they live in and/or have died in. If British citizens disapprove of things like inheritance tax and don’t want to pay it can I suggest that the immigrate to a foreign land with a low tax regime, e.g., Saudi Arabia. Otherwise while they continue to live here, make a living here, bring their children up and have them educated here, receive medical care here, receive protection from the police and armed forces, receive social care and pensions here etc., etc., etc., they shut the f*ck up and pay their way in the way that the law demands like the rest of us.

”The purpose of these levies and regulations [IHT] is not to raise revenue (release resources to government) but gradually and continually to correct the distribution of wealth and to prevent concentrations of power detrimental to fair value of political liberty and fair equality of opportunity’.
(John Rawls, A Theory of Justice(Cambridge, MA, 1971), p. 277 – and it is necessary to read the subsequent pp. for the full exegesis of the priinciple.

Brumanuensis

I completely agree on LVT. If implemented, it should replace Council Tax and Business Rates, and be used, if possible, to reduce VAT back to 15% – thus helping businesses and reducing inflation – and fund increases in capital allowances, for example.

The biggest problem with the UK tax system is that it’s fragmented and inconsistent. As you point out, stamp duty is poorly-designed and ill-suited for the purpose of taxing wealth. A broader ‘wealth tax’, like the ISF in France, should replace it and all other similar taxes, and be levied across all assets. This would simplify the tax system, raise equivalent or greater revenue, reduce distortions in taxation and reduce inequality.

We also need to look at minimising preferential treatment of income, which is why I think the Lib Dems were right to call for the harmonisation of capital gains with income tax. I understand the Mirrlees review did the same. Equally, a single carbon tax needs to replace fuel duty and all other environmental taxes, with similar benefits to the ‘wealth tax’ mentioned above. This would have to be balanced with rebates for the poorest, to reduce the regressive impact.

A Financial Transactions Tax, in place of SDRT and Stamp Duty, should also be levied. This should eliminate the current distortion whereby no charge is incurred when buying foreign shares, but is incurred when buying British shares.

I don’t agree that NICs and Income Tax should be merged. As well as disadvantaging pensioners, it would simply confirm National Insurance as merely another tax, which would harm future attempts to use it as a basis for a renewed contributory principle in the welfare system.

Just my (few) penneth.

Daniel Speight

Talking about tax is now not such a toxic subject and i hope it stays that way. There are some who fear tread the path of using tax to help reduce the deficit, but hopefully the French election results will give them some courage.

I hope one thing a future Labour government would do would be to talk to our friends in Europe and America about getting out of this death spiral of lower corporate and top end income taxes. What we have seen since we stepped onto this neo-liberal down escalator is the widening of inequality. This is not social democracy or anything that the Labour Party should be associated with.

http://twitter.com/robertsjonathan Jonathan Roberts

Daniel, do you believe in a ‘maximum wage’? I’m not goading, I’m genuinely interested.

Daniel Speight

No, not at all Jonathan, but I would be quite happy to see anything over a million taxed at 90%.

It’s so interesting to see some of America’s well known billionaires stating that they feel under-taxed. Shame on our British ones for looking for more tax cuts.

I know it’s the bee in my bonnet Jonathan, but have you ever looked at the Gini coefficient on incomes. It’s quite eye-opening. I would recommend looking at the last chart called Gini coefficient, after taxes and transfers on a Wikipedia page called List of countries by income equality. (I won’t put a link in case it gets held up in moderation.)

Now this is just purely data, how you use it is up to you.

AlanGiles

To respond to Jon, I have to say that while that might not be a “maximum wage” in theory, people who are driven by complete avarice are to my mind psychologically flawed.

There comes a saturation point at which you do not need – in the real sense of the word “need” more money. For example, I once worked for a man who camt to this country as a refugee (from Hungary), whose sole ambition was to make as much money as possible – when he died 20 years ago, they virtually found money in every available cupboard and drawer – some of it long defunct and no longer legal tender.

I doubt that money ever bought him satisfaction (I can understand the miser-type and ruthless streak to acquire because of his early life, having come to this country virtually penniless), but because of his manner and sometimes, not illegal, but morally dubious business deals he had very few friends, and died a miserable old batchelor – though I suppose it is true that if money can’t buy you happiness at least it allows you to be miserable in comfort.

Next week a very high ranking bank official in the UK will be appearing in court on charges of fraud – she once again proving that the more you have the more you want. Can we say Robert Maxwell was entirely sane after reading Tom Bower’s biography. Is “Mr. Rupert” the full shilling? – what is the secret of their excess?

I genuinely believe that there is actually something wrong with people who just want money for it’s own sake and do nothing with it: my late and unlamented employer (one of only 2 jobs I ever resigned from because in part because of the manner of this man), boasted that he would never give a penny to charity, because he thought that every charity was crooked (even the big ones). Even worse are those who use their money to “buy” power, influence or humans.

Of course, people like Bill Gates do a great deal of good and humanitarian things with their money, people like him have a better sense of values.

But people like (well let’s say a one time frequent poster on LL from the North Downs) who seem to think you can’t have too much, and wish to try to impress or boost their own fragile ego by constantly making reference to their wealth – I frankly think is a form of mental illness.

I agree with Daniel that people whose sole motivation is money should be taxed at an extremely high rate. I doubt they would leave the country – they probably feel safe here. It is like all those alleged “entertainers” who always promise to leave the country if Labour wins an election – many say it but very few do it and those who do (Jim Davidson comes to mind) I think we are better off without them.

* Shelly Manne (1920-1984)

http://pulse.yahoo.com/_ZPXYLRVP4XOIGGDJWAL6HUO7U4 David

Your argument is cogent Alan, but relies on a minute number of data points from which you derive a narrative I believe you already subscribe to.

The example of a banker, a penniless miser, and of could Maxwell are all reasonable, and in fairness you recognise Bill Gates against that, but I could give you hundreds of additional examples of “angel” investors, who having made “excessive” amounts of money are now an integral part of the fabric of innovation and charitable donations necessary in this country.

Specifically, and to make a personal point, my work in charity is almost entirely funded by one man – a computer programmer and entrepreneur from the 80’s: to rely on the smaller donations possible by “normal” people for my salary and expenses would mean I would have to spend 90% or more of my time fundraising, and make my actual work next to impossible

While I see the attraction of the 90% tax on £1m+ earnings, you have to recognise that it is gesture politics: the ease with which a millionaire can modify his or her tax status would mean in practice that only those who chose to pay would do so (the alternative, taking a US approach to worldwide earnings is entirely possible, but would require significant international diplomacy – rewriting every double taxation treaty – and cause internal upheaval at HMRC which may or may not increase the overall net tax take).

As ever, the answers cannot be straightforward, or else we’d already be there.

AlanGiles

I certainly agree David that a great number of wealthy people have a well-developed sense of social responsibility – the Charities Aid Foundation Guide To Charitable Giving is a real eye-opener, in that there are a great number of businessmen who are generous enough to set up charitable trusts, and I certainly wouldn’t want to deter them, I was just questioning the mindset of those who feel that they can’t personally ever have enough – again I think you can see at the start why Maxwell was so avaricious in his early years, given his poor background, but in the end, like somebody who over-indulges in drink, drugs, sex etc., getting money seemed to be a compulsion, even to the extent of resorting to criminal behaviour to get it. Of course, Maxwell was a rare, but not unique case, and I wouldn’t pretend that the majority of ultra-wealthy individuals have criminal tendencies.

Could I ask what your charitable organisation is concerned with?

* Howard Rumsey (1917 – )

http://pulse.yahoo.com/_ZPXYLRVP4XOIGGDJWAL6HUO7U4 David

We work in Africa, helping to promote and drive the creation of a thriving market for small-scale solar-powered lanterns, designed to replace the kerosene lantern (and in doing so alleviating poverty), using a social enterprise business-based “help, not aid” approach. It’s a fascinating challenge, and one that is bearing real results.
Funnily enough I also feel I know both sides of the coin on this debate: in my former career in the city I earned very well, and one of the impacts I found was that the more money I earned, the more interest I had in what I did with it, and accumulating it started to feel like an end in itself. I can easily see how for many that same feeling could become an obsession.In my case it was helpful: the recognition that it was “hardening” me was the impetus to volunteer, and my bank balance allowed me the flexibility to stop earning completely for almost a year while I helped at the charity (which, by the way, was the reason behind my “Jobless Dave” moniker on the older version of LL): I was fortunate enough that after that I was offered a full time job at the charity.

Quiet_Sceptic

I’m surprised that there is so little mention of capital gains in the article as I would think these, instead of Inheritance tax, have the strongest grounds for being taxed. The very wealthiest in society have far more flexibility to receive their income via capital gains and have the disposable cash to invest in assets which, again, tend to yield their returns in the form of capital gains.

There’s also the question as to why capital gains, which are in the end income, are taxed at lower rates than earned income.

jaime taurosangastre candelas

Peter, re all properties benefitting from state-sponsored development permissions.

I don’t think I see it that way, but I am persuadable. At a fundamental level, we have planning laws that nominally apply everywhere. Of course, some local authorities are harder to persuade, others keen to get building, and there are things like areas of beauty with other restrictions. I do not however see that permissions (or refusals) are implemented as a central tool of planning policy – I see it as much more local and accidental (not in accordance with a central plan, but in accordance with the merits of each application).

I do confess that I have personally sought out and exploited these rules when buying 8 acres of farmland from my father-in-law. I deliberately chose to buy farmland with no planning permission, and little likelihood of gaining permission. That suited both me and my father-in-law: he keeps using the field on a peppercorn rent, and I got the land at farming prices. Far into the future, when he is dead, his farm sold, and the real squeeze on land bites, the rules may change and planning permission may become easier to obtain, in which case I have his blessing to get some architect to draw up plans for 12-18 “executive homes” surrounded by woods and a small river on 3 sides, and sell up. However, that is a speculative investment, not a current use, which is to produce milk and cheese.

derek

O’ so you think you can tell! good living our just the weight of your wealth, so you think you can tell?

jaime taurosangastre candelas

Derek, are you coming with the lyrical poetry again?

I can tell Heaven from hell, I’m quite good on pain management, train tracks and green fields are distinctly different, not sure about the smiles and the veils though. My wife is pretty good at acting.

I’m not aware of trading any heroes for ghosts (2 of my 3 heroes are still alive, and Clem Attlee I don’t believe haunts anyone). I prefer trees and cool breezes to hot ashes and air. Cold comfort is normally what I get when I have somehow irritated my wife, and the walk on part in “the” war is not something I much recognise, unless it is a few interventions at third hand on Serbian citizens and soldiers at 50 miles distance from their front line in the civil war they fought. I do however feel the lead role in a cage sometimes – you put yourself up to be the boss, someone quite rightly will have a go at you, and responses are often constrained by management practice.

And yes, you and I do often seem to go around like goldfish in a bowl on these LL discussions, circling about with little apparent memory.

Is that enough lyricism for you?

(I do apologise to anyone unfamiliar with Derek and me having a slugfest through music – it amuses us)

Lastly, to honour the “Alan Giles Way”, I should end up with something like:

(* Roger Waters 1943 – )

derek

At least the hearth tax did exempt the poor (http://www.progenealogists.com/greatbritain/hearthtax.htm) death and taxes Jaime, two certainties and both universal throughout the globe.I guess if I owned a large field I’d donate it to those who didn’t have a home rather than build some executive homes for those that have more than one home. We differ Jaime, my pressure is the weight of a nation while your pressure if the weight of your own gains. So you think you can tell!

I like the sound of the milk and cheese output. Jaime’s Old Gloucester? Taurosangastre Blue? I may request samples

One of the problems with the planning system is that the current state of land law in England and Wales is quite confused. The legal precedents on covenants, easements and other third-party rights over land are incredibly complex and although the Land Registration Act 2002 cleared things up a bit, there are plenty of pitfalls for unwary laymen. The persistence of two different land systems – registered and unregistered, although the latter is dying out – doesn’t help.

It would help if governments got round to implementing the Law Commission’s recommendations on third party land rights. If anyone has a spare week, they might want to read the Commission’s report ( http://lawcommission.justice.gov.uk/docs/lc327_easements_report.pdf ). Take consolation in the fact that even lawyers find this hard-going.

Daniel Speight

There is a fallacy spread by the followers of neo-liberalism that high personal and corporate taxes either drive away existing entrepreneurs or discourage new ones. There are a number of reasons why this idea is suspect.

In my experience I have found those starting new businesses are seldom driven solely by money. There are other reasons like being one’s own boss, following a dream, a new idea or product for which no outside company seems to be interested in and so on. Of course everyone would like to be rich, but most start-ups are pretty hand-to-mouth to begin with and a large personal income or a high company profit are unlikely in the first few years anyway.

If low taxes were the main contributing factor for entrepreneurship then we should have been tripping over entrepreneurs for the last twenty years as there would be so many of them. Low corporate and top end income taxes do what it says on the box. They are there to reward corporations and high income income earners. You see it doesn’t say on the box ‘an entrepreneur’s tax’ does it?

If you want to encourage entrepreneurs then formulate policies that do just that with investment aimed at allowing their ideas to be given a chance.

DaveCitizen

“should confront the issue of wealth taxation as part of efforts to secure the public finances and achieve greater social justice”

I believe there is also a clear and coherent argument that it should be confronted from the perspective of improving economic efficiency and competitiveness. Many of the most important assets needed by the economy have been accumulated well beyond their role in servicing productive business. Many have been secured as part of a process of private wealth entrenchment, where the assets are held as personal securities and insurance policies. This process is accelerating amidst all the economic uncertainty.

Labour needs to use taxation to release accumulated assets back into the economy so that they become cheaply available for the next round of dynamic entrepreneurs rather than stifling their options through rents that prop up wealth bubbles created by the last lot who struck gold.

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